39 Responses to Huffington post- It’s not the deficit, stupid!

It is clear to me from many of the comments to Warren’s article that first we will need to overcome much fear before a argument based on mmt logic will work. For some believing MMT is even more terrifying then believing the conventional wisdom. For example, telling people that the only constraint on government spending is inflation reinforces their fear that the government will keep spending until their dollars are worthless. Telling them that money is created by typing on a keyboard is even scarier. I think we need to remember that for many MMT sounds like witchcraft. I’m just hoping for wide spread enlightenment before Warren gets burned on a stake.

@Jon, One of the commentors repeatedly argued the existence of a global inflation crisis, for which there is absolutely no evidence. Was he lying with intent, or was his fear of the worst driving him to do it? I’ve had an easier time selling people budget-busting junk than getting them to understand and acknowledge MMT. Never seen resistance like it.

Mosler is correct in that as a money printer within a fiat currency system, solvency in not possible by definition.

Problem is that the same fiat currency system will eventually implode. Like any other pyramid scheme you constantly need a larger base at the bottom (new money coming in) to keep the scheme from collapsing.

Oh and the 7 innocent frauds apply equally to ponzi / pyramid schemes – would like to see a MTT person put together an argument the compares MMT to a pyramid scheme and tries to show the two are not the same.

@Ben Johannson, That ownership has value is a grand illusion that’s been created by the fact that the promise of life, liberty and peace of mind was actually subordinated to property rights from the beginning. To then be confronted with the notion that property is worth less even than a person (Willard apparently finds the idea that an artificial body is a person consoling) is upsetting.
If I am only important as long as my purse is full, then he who steals the contents of my purse, deprives me of my essence. See?

@Jason, don’t know where you got that from. Gave numerous examples. but think what you want. Is taxing capital gains at a lower rate “innocent”(whatever that means)? Nice world view yourself

@esm
Lets just leave everything the same including the current monetary thinking, since we cant make the world perfectly fair, no reason to do anything then. Political power is a zero sum game. A political surplus is someone else political deficit.

I wasn’t advocating leaving everything the same. I was merely claiming that you want to go in the wrong direction. The government is like fire. It can be used for good, but it is also dangerous, and generally the bigger it is, the more dangerous it is.

Increasing tax rates empowers government without accomplishing your goal, which I presume is to diminish the power of the politically connected, and to enhance the power of the politically disconnected.

Frankly, the only reason that we’re discussing higher income tax rates is because Obama chose for campaign purposes to frame the budget deficit as a problem and higher tax rates on a tiny fraction (in terms of 1:1 voting power) of the population as the solution. It was pure politics, with no higher purpose than to increase his probability of being reelected. Now that he’s been reelected, though, he has to follow through or look like the unprincipled, pandering politician he really is.

Italy have 2000 bilions of debt, and divided for the 60,000,000 of people makes 33,000 €uro per inhabitant, but 50% of rich is in the hand of the 10% of the italians. So with 15,000 per inhabitant we make our internal trade-exchange, but:
1) Without our central bank (and BCE pump up interest) and with fiscal compact we can’t raise the amount of that money.
2) And with the 55% to 70% taxes, in years we will give all the circulation money, and if not possible we will sell our goods, property, to pay the taxes and the normal living, until to hit the bottom.

Too bad your article was spammed by that gerald4 guy who doesn’t have a clue (“freshly printed paper US Treasury Bonds”) but has 6378 “fans.” Huffington Post was good once, I think, like in 2007. It’s turned into a joke.

Thanks for the post, though. There’s always a chance you’ll get through to someone.

I see. Anyone that has been successful and doesn’t spend 99% of all money earned will now be labeled a hoarder (enemy of the state) and be forced to spend all and if they refuse will be hit with taxes that simply take away the money. Nice plan bro’

I think that’s a low level view. Would you say the current distribution of financial wealth is in proper proportion to the amount of tangible wealth created by the ones who have it ?. Does finance and speculation really create that much real wealth. Or have they used their money to lobby and derive an advantage from the political system ( tax laws etc). Why do I have to pay a vastly higher tax rate on my income than someone who makes a capitol gain. Why do I have to pay property tax, while companies like wall mart comes to town bullies the local government into not paying any. Why don’t I have a government guarantee from ruin.

I guess now days having money is proof of success and that one has earned it. regardless of how they got it. lobbing, theft,rent seeking, eminent domain,insider trading. government back stops. political bribes, tax advantages. Of course if you honestly toil for 12 hours a day producing real goods you’re just a sucker and deserves no more.

You assume this financial wealth was gained fairly to begin with. I do not.

Life is not fair I suppose. There are many inequities, and the most important ones have nothing to do with financial wealth.

The problem with using the tax code to address these inequities is that you create more problems than you solve, as well as more inequities. And you empower corrupt politicians, unaccountable bureaucrats, and the very lobbyists you hate while you’re at it.

If you think that raising tax rates on upper income people will redistribute income and wealth and reduce inequality, then you are deeply misguided. All of my experience and knowledge of finance and economics tells me that it will have the opposite effect.

If raising taxes on the upper crust has little effect on spending, then doesn’t that say taxes on them are realtively stable. So when the economy tanks, the taxes from that segment of the population stays constant. That would suggest smaller deficits from the auto stabilizers if they paid a higer proportion of the tax? In turn there would be less of a deficit for everyone to get the vapors over.

The way I look at it taxing the rich right now has two benefits. It gives congress the false idea that it can spend more then it could without those taxes. Taking from hoarders (savers) and spending would increases aggregate demand. Second most of the deficit propaganda comes from Koch brother type think tanks funded almost exclusively from the upper crust. Resulting in more aggregate demand and less deficit misinformation. A big win for MMT I think.

Bravo Warren! A Tour de force! So well written that even your average congressman should be able to understand it. Reminds me of an article I contributed to way back in January, 2001 with a title that seems somehow appropriate for your Huff Po piece. Apologies for not giving you attribution at the time.

Nice article! I wish someone at the white house or congress would read it. One thing, maybe in a future article you could address the Clinton tax hikes, since many politicians and pundits are currently citing them as a justification for raising taxes now.

@vincent, Agree, nice write up. It would be great if someone at the WH, like the President, read it. We have now had four years of trillion dollar plus deficits and still no inflation. Shouldn’t someone notice that?

Yeah, Warren, you sorta’ need to do what Bill Black does. He repeats and repeats and repeats. The guy’s a real washing machine. I know it’s not your style. But maybe you could end your articles with:

(Lousy examples)

>Want to understand the Clinton tax surplus and why it did us no good? Read: [Insert link to your past article]
Want to understand the National debt, for real? Read: [Insert link to your past article]
Want to understand why our grandchildren will not be hit with overwhelming debt? Why that’s all B.S. to dumb and dumber? Read: [Insert link to your past article]

While roughly in paradigm with fiat currency operations, his view was that 99% of the population don’t want to hear it, because they’re thinking micro, not macro economics, i.e. “me first,” not return on coordination.

Also, his outlook was that real economic organization had to be top-down. All his accounting & economics education was gold-std thinking, and he would not be swayed despite acknowledging fiat operations.

His prediction was that it’s now impossible to wean the electorate off the idea of fiat currency savings as a long term store of value.

We’ll see.

It’s down to policy war between those who want to preserve the buying power of their own currency savings, and those who want to achieve enough income to purchase what they can produce.
(Partly, it’s war with themselves, and certainly war with the bulk of their own offspring)

Solution step 1 is to stop trying to save fiat?

Step 2 is to set minimal social credit standards (automatic stabilizers) and give incentives to consume whatever we can produce? [Note that that’s bottom-up.]

Step 3, circumvent the top-down/bottom-up (produce/consume) connundrum by rephrasing them as inseparable. The real issue is maintaining consumption=production AS WE GROW both population and options (capabilities & potential output).

Hence, exploring national options = bottom-up priming, tilting a dynamic balance so that threshold income is always pulling net incentive to produce.

We have zero predictive power, but awesome selective power. Hence, “producers” can’t predict what a population needs, and must explore & respond to expanding consumer wants. That’s just extending Natural Selection to cultural levels. In the end, added diversity always explores new options.

Instead of trying to save fiat, we have to allow our offspring to explore options. By net investment in offspring, we reap the biggest return of all (by far), the return-on-coordination.

Barring net destruction of the product of population_X_capabilities, future production will always dwarf current production. Hence, there’s no point in saving fiat, and every incentive to grow net Output as return on coordination.